Climaco: Loopholes in BOT law should be amended

Secretary Gloria Tan Climaco, the presidential adviser for strategic affairs, said yesterday that the current Build-Operate-Transfer (BOT) Law is full of loopholes and should be amended.

She explained that amendment of the law would prevent a repetition of the controversy on the Terminal 3 project of the Ninoy Aquino International Airport being undertaken by the Philippine International Air Terminals Co. (Piatco).

She said that the 1997 concession agreement and the amended and restated concession agreement (ARCA) forged by the government with Piatco for Terminal 3, a BOT project, were substantially different from the original terms and conditions contained in the bid documents and draft concession agreement.

She said that the present contract is "lopsided" in favor of Piatco, such that the government would be saddled with additional burdens, while Piatco would be secure from any business risks.

She proposed an amendment that would prevent radical changes to the original terms and conditions imposed by the government on a BOT contract.

She noted that the ARCA reduced from 12 to 4 the number of public utility revenues (PURs) subject to regulation by the Manila International Airport Authority.

Climaco said this means Piatco will have complete say on the rates to be charged for PURs except aircraft parking fees, aircraft tasking fees, check-in counter fees and passenger terminal fees.

"A 1997 DOTC opinion stated Terminal 3 is not a monopoly, thereby exempting Piatco from the 12-percent cap on rate of return base on PURs," she said.

She described a PUR as the fees paid for the use of a public utility.

"The 1997 concession agreement also imposed upon the government more special obligations not contained in the draft concession agreement," she added.

She also contended that the liquidated damages payable by the government to Piatco changed substantially from those stated in the 1997 concession agreement and the 1998 ARCA.

"Liabilities of the government to Piatco, according to ARCA, are payable on demand," Climaco stressed.

The other day, Climaco told the Senate Blue Ribbon committee headed by Sen. Joker Arroyo that the government is seriously considering the takeover of the project and the Terminal 3 franchise, to cure the "lopsidedness of the contract."

She said that the proposal for government takeover was made by Germany-based Fraport AG, which owns 30 percent of the shares of Piatco. It actually shouldered about 80 percent of the Terminal 3 project costs but it could not own more shares of Piatco because of the law limiting foreigners to a maximum of 40 percent ownership of public utility firms.

The group of Cheng Yong, Piatco president, owns 60 percent although Cheng Yong spent only $16.5 million of his own money, plus $6 million borrowed from Fraport.

Fraport has agreed to be paid only $400 million for its $509-million exposure, with a repayment schedule of 15 years at an interest rate of 6.2 to 6.8 percent.

Climaco said Fraport, because it has the expertise, could operate and maintain Terminal 3 "subject to Philippine nationality requirements."

"This proposal is a happy solution to this unhappy situation," Climaco said.

She said that the top officials of Fraport AG are due to arrive next week to resolve a number of procedural issues for the government takeover of Terminal 3.

The chairman of Fraport, Robert Koch who is also president of the German state of Hesse, wrote to President Arroyo last Aug. 23 expressing satisfaction that the Fraport negotiating team and Climaco had reached an amicable solution on the project.

"Our commitment to the future of the Manila Terminal 3 airport is not only demonstrated by the fact that the handover price of $400 million is significantly below cost, but also by the fact that we welcome your willingness to consider that Fraport run the operation and maintenance of the new terminal subject to Philippine nationality requirements," Koch wrote.